Pivoting to Technical Textiles

The Taiwan pavilion at Cinte Techtextil China, held in September in Shanghai, the leading exhi-bition in Asia for technical textiles. Photo: Jens Kastner

Companies are seeking to avoid the low-margin trap by moving into this technically demanding segment of the industry.

As the days are gone when fabric could be cut and sewn in Taiwan at competitive costs, its textile sector has been shifting toward technical textiles for which production relies on automation rather than human labor. In this segment of the industry, in addition, the ability to deliver customized solutions trumps the ability to churn out huge volumes at cheap prices.

Data from the Taiwan Technical Textiles Association (TTTA) shows that the island’s output of technical textiles reached NT$130 billion (US$4.2 billion) in 2017, more than double the level at the beginning of the decade. It already accounts for roughly one-third of Taiwan’s total textile output.

Mobiltech and Buildtech are currently seeing particularly rapid increases in demand thanks to such factors as strong growth in automobile production in China and China’s Belt and Road infrastructure drive. Among the hot products in Mobiltech are air-bags, automotive engine oil filters and high-speed train gangways. Buildtech includes fabrics used to separate different types of cement, for example in the construction of roads, airports, and subway tubes.

As a reflection of Taiwan’s turn towards technical textiles, the island had the third-strongest presence at the sector’s leading fair in Asia, the Cinte Techtextil China, held in early September in Shanghai. The total of 13 booths from Taiwan trailed only Germany, considered the world leader in technical textiles, and host country China.

“Profit margins for technical textiles are higher than for functional textiles, which many Taiwanese manufacturers supply to international brands such as Nike, Adidas and Under Armour, as technical textiles are more specialized and thus involve less standardized low-value production,” said TTTA general secretary Huang Po-hsiung, interviewed at Cinte. “We have seen steady annual output growth rates of 3-5% over the last decade and, interestingly, growth remained robust even during the global financial crisis,” he added.

According to Huang, most Taiwanese technical-textile makers focus on nonwovens, a category of fabric for which the fibers are bonded together by chemical, mechanical, heat, or solvent treatment, as opposed to being knitted or woven. Applications for nonwovens range from baby diapers and surgical gowns to car acoustics – the fabric placed inside the auto body or mud guard to dampen noise and give passengers a more pleasant ride.

“Taiwanese new investment in non-woven factories has already reached NT$6 billion this year, illustrating that the manufacturers have been enjoying good profits,” Huang said. “The outlook is also rosy for smart textiles, a sector where Taiwanese textile and electronics companies cooperate in the development of fabrics with embedded washable sensors, for example to measure heartbeat or temperature or to make devices save energy.”

Fabrics that can help save energy have become more sought-after with the advent of electro mobility, vehicles powered by electric drivetrains rather than fossil fuels. Recent tests by German carmaker Audi have shown that new innovative types of fabric used to heat car seats can reduce the electricity consumption for heating by 50%.

Cars today typically use between 25 and 50 kilograms of technical textiles. For electric cars, any reduction in electricity consumption translates into extended range, which is an extremely strong selling point.

“However, there is no easy entry for outside players in terms of Mobiltech, as auto-makers maintain an extremely close-knit net of suppliers that usually have their production lines in close proximity to the car factories,” Huang said.

Among the exhibitors at the Taiwan pavilion at Cinte was Chiayi-based U-Long High Tech Textile, which showcased its newest product, a fabric made by weaving nylon and collagen yarns together. The collagen, made of seaweed, absorbs humidity, sweat, and body heat, and the fabric is designed to be used in protective clothing for construction workers and others.

Another Taiwanese technical textile manufacturer exhibiting at Cinte was Taichung-based Advance Hitech Textile International Corp. The company’s booth contained a heap of file folders with numerous letters of certification from the International Organization for Standardization (ISO), the Taiwan Textile Research Institute (TTRI), and other organizations. The certifications deal with physical properties such as tear strength, fissure strength, abrasion resistance, and color accuracy.

“Our lifejacket fabric has ISO certification for color accuracy, as minor deviation from the permitted color range could bring about a dangerous loss of visibility in adverse weather conditions at sea,” explained Ken Liu, an Advance Hitech Textile sales manager. “The challenge in manufacturing this fabric lies in the difficulty of controlling the dyeing process to an extent that the color becomes extremely stable.”

The process becomes even more difficult, Liu said, when extremely thin fabric – such as that used for military sleeping bags – is dyed, as thin fabric tends to move around erratically and wrinkle when processed in the dyeing machine.

The Taiwanese police are also among Advance Hitech Textile’s customers. The police had previously used only waterproof, breathable U.S.-patented Gore-Tex for its uniforms, but in 2016 the police force opened a tender for alternative, less costly local solutions, enabling Advance Hitech Textile to win an order for several thousand police uniforms.

Refugees spur demand

Although as a fabric supplier Liu usually does not know the specific end-use of the fabric, in recent months he has been noticing significantly increased European demand for fabrics used in life vests and lifeboats. “We think these customers supply European organizations rescuing Arab and African refugees who come to Europe across the Mediterranean,” Liu said.

Another Taiwanese company in the technical textile supply chain providing solutions for protection against water is Tomlong, also based in Taichung.

Tomlong laminates fabric, such as that made from nylon or polyester, with a thermoplastic polyurethane (TPU) film, for use in producing waterproof items such as hunting bags or inflatable products like life vests and rafts.

Complete waterproofing may involve the replacement of stitches with radio-frequency welding, a technique that has been around for a while for boats and military applications but is new for outdoor civilian bags. “Our customers are the top echelon of the outdoor industry, and the cost of our solutions is relatively high, with the end-product like a bag for climbing usually costing in the neighborhood of 200 euros,” said Daphne Hsu, Tomlong’s marketing director.

“We have 10 R&D engineers and cooperation projects with the Plastics Industry Development Center in Taichung, TTRI, and several technical universities in Taiwan, and we need good profits to sustain our R&D. We wouldn’t be able to compete with Chinese factories on volume and price,” she added.

Taipei-based Everlight Chemical Industrial Corp. does not make fabrics but rather the glue that bonds fabric layers or leather together for applications such as home accessories, medical gowns, and automotive uses. Its flagship product, Evereco PUR, is environmentally friendly, as it does not emit harmful volatile organic compounds (VOCs).

Everlight’s Evereco PUR and its dye-stuffs have gained the Zero Discharge of Hazardous Chemicals (ZDHC) certification from an alliance of major global apparel brands, including Zara, Nike, and Adidas. “Many competitors in India and China use solvent- type glue, which is not eco-friendly and harms textile workers and consumers alike,” said Woody Wu, sales engineer with Everlight. “Demand for our products is boosted by ever stricter Chinese standards for environment and worker protection, as the Chinese government is under increasing pressure to reduce air pollution in the cities and ensure workers’ welfare,” he added.

This trend has been amplified in recent years by the increased production in China by foreign companies, as these manufacturers have to equip their workers with modern protective clothing in order to keep their insurance coverage.

At the same time, China’s crackdown on air pollution and its efforts to control industrial hazards have forced countless non-compliant factories supplying raw materials to close down recently, Wu said. As a result, prices of chemicals such as those used for Everlight’s PUR and dyestuffs have risen quite dramatically this year,

Additional headaches

Willy Shih, general manager of Kae Hwa Industrial, a Changhua-based maker of breathable film used in diapers, packaging, and coveralls to protect lacquerers or medical workers, noted that the speculative hoarding of raw materials in China has also contributed to higher raw material prices this year. Making matters worse, the ongoing U.S.-China trade war is a source of concern. Shih worries that it will drive down global prices of intermediate products, including technical textiles.

“If the U.S. slaps higher tariffs on Chinese imports, our Chinese competitors will have to sell their products elsewhere and will reduce their sales prices to meet that end,” Shih said. “And while the sales prices of technical textiles go down, many Chinese suppliers will go bankrupt. Many of them already are heavily indebted, and this is something we will have to watch very carefully. It could eventually mean customers defaulting on payment.”

Another difficulty derives from Taiwan’s inability to sign trade agreements with major export markets. Kae Hwa in recent years has been compelled to shift some production from Taiwan to Malaysia, so as to avoid 15-20% ASEAN import duties on Taiwan-made technical textiles. Under the China-ASEAN free-trade agreement, such imports into China from ASEAN countries are tariff-free. The company is considering opening a second factory in Malaysia to serve both the ASEAN and China markets under the preferential tariff regime.

The China market remains attractive enough to spur ever increasing investment by Taiwan’s technical-textile makers. Messe Frankfurt, the organizer of Cinte, forecasts that China will continue to have a vast demand for imports of technical textiles due to gaps between foreign and domestic manufacturers in terms of technology, product standards, and quality.

Besides Taiwan, the major sources of supply are Japan, South Korea, the United States, and Germany. The main import segments are medical and hygiene, plastic and rubber coated textiles, nonwovens, and glass-fiber textiles.

New opportunities are also opening up for Taiwanese technical-textile makers to explore in other potentially large markets. For example, two highly populous countries, Brazil and India, have recently made it mandatory for passenger cars to be equipped with air-bags, according to Messe Frankfurt. The manufacturing of fabric for airbags requires a high degree of technological sophistication to ensure that the fabric can withstand the enormous pressure generated when the airbag inflates.

Another market with substantial growth potential is the United States. Michael Jaenecke, Messe Frankfurt’s director of brand management technical textiles, notes that “in the U.S., two of the largest consumers of technical textiles – the military and infrastructure – are about to receive huge new financial infusions from the government.”

Taiwan Business TOPICS

Taiwan Business TOPICS is published monthly by the American Chamber of Commerce in Taipei, and covers current topic affecting business conditions in Taiwan, an Industry Focus section on a particular industrial sector, and other reports prepared by the magazine’s staff of experienced professional journalists.